Getting your business to operate at it’s best takes a lot of planning. From your product to your marketing, not to mention cashflow and even people management. But there’s one factor that many business owners overlook, and that’s avoiding fraud.
Internet based fraud has grown to become a billion dollar risk for any business operating online.
In 2020, many forms of digital fraud reached record levels. So if you’re working on your business strategy, how can you minimise and prevent fraud and it’s effects?
Step one – Identify the fraud risk in your business
Every business that operates online is susceptible to some form of digital fraud. The main ones to worry about as a business owner are:
Payment fraud: A higher risk if you handle multiple transactions per day, for example an ecommerce store.
Data theft: Any site that holds details on customers such as payment or personal information online.
Fake users: These impact the marketing funnel and usually result in high levels of abandoned carts, misspent advertising and skewed analytics.
Account takeover: Can be a hacked account that is then used for various forms of fraud, from phishing to money laundering.
PPC fraud: Often referred to as click fraud or ad fraud, this impacts your digital ad spend by wasting views and clicks on bots.
CEO fraud: A type of spear phishing attack where a scammer impersonates a high level exec in an attempt to steal money, usually via wire transfer.
Step two – Create systems to minimise your exposure to digital fraud
The first line of defence in any fraud prevention strategy is making sure you have processes in place to minimise any potential risk. This means making anyone who works in your business aware of how internet fraud can infiltrate.
This can include any of your employees, contractors, external workers and anyone with access to your databases or bank accounts. With more people working remotely in the post-covid world, this is more essential than ever.
How do you create systems to reduce the risk of digital fraud?
Educate everyone who works with/for you about how fraud works. Make it an essential part of onboarding new employees and contractors.
Ensure your staff understand processes for sensitive procedures such as swire transfers or moving, storing or releasing data.
Have regular audits of your systems to ensure software is up to date and secure, and to identify possible flaws or opportunities for infiltration.
When using CMS, make sure any add-ons or plugins are updated and remove any unused plugins.
Have a plan in case of system failure, for example ransomware or DDoS (denial of service) attacks.
This isn’t an exhaustive list of strategies to avoid fraud, but is intended to serve as a foundation for your risk analysis. Every business has a different exposure to internet fraud, so it is down to you and your team to run an audit regularly.
Step three – Using automated systems and software
Fraud detection and prevention is a huge industry, and one that every online business should consider. When the stakes are high, for example the loss or theft of data or money, and the legal implications, the outlay for fraud prevention software is pretty minimal.
A report by financial giants PwC found that a third of businesses had no online fraud monitoring program. And half of all businesses have an outdated fraud risk program.
Put simply, fraud detection and prevention is a neglected area for most businesses. But using a mixture of automated services can hugely reduce your company’s exposure and potential for downtime or legal action; it can also save you a lot of money on an ongoing basis.
An example of this is the issue of ad fraud, where PPC ads are clicked by bots. Research from fraud prevention service Cheq found that the industry as a whole lost $35 billion to fake clicks in 2020.
Contrast this with payment fraud or credit card fraud, which cost $32 billion in 2020 according to Merchant Savvy.
In short, adding fraud protection to your software stack is going to help you minimise leakage and maximise effectiveness. It should also prevent the chances of a major data hack or other potential internet fraud episode.
According to PwC, most SME’s have around four different fraud detection tools. These can include platforms like:
Human (formerly WhiteOps)
These are just a small selection of the fraud prevention solutions on the market right now, and the best thing is to research. Many of them offer free trials too, so you can use these to run audits and work out which package works best for you.
Step four – Repeat the above steps
Just because you did a fraud audit three years ago, doesn’t mean you’re done. Digital fraud is constantly evolving and adapting. This means you should be too.
Yes, it can be hard to find the time, among the many other things your business needs. But fraud detection and prevention can be the difference between sinking or swimming for many businesses.
You don’t necessarily need to revisit the whole process of running an audit to prevent fraud every year. But it’s good to check up with the systems you are using to see if they’re working efficiently, and to make sure the processes you have in place continue to be effective.